China Resources Breweries (CRB) made its first foray into the vast East China market Tuesday, swallowing a 70 percent stake of Zhejiang Qianjiang Beer Group , a leading brewer in Zhejiang Province.

The brewer had previously focused its development on the country's northeast, northern and southwestern regions.

"Cooperating with Qianjiang Beer is a good opportunity for CRB to develop and gain a market share in Zhejiang, as well as in the country's eastern region," said CRB General Manager Wang Qun.

The local brewer, which owns the Qianjiang and Zhonghua brands, sold a total of 240,000 tons of beer last year, an annual growth of over 26 percent. This latest acquisition will make a major contribution to CRB's market competitiveness, increasing its total annual production capacity to 4.56 million tons.

"With CRB's advantages in capital, brewing technology and management concepts, this co-operation will help Qianjiang grow into the province's best brewer, and make its two brands more popular," said Qianjiang Beer General Manager Kong Feiyue.

Zhejiang's beer market is the scene of intense competition, said Kong, noting that some market consolidation is inevitable in China's second-largest beer producing province.

China Alcohol Industry Association Beer Branch Director Xiao Derun said the deal "symbolized that the asset reorganization of China's beer industry has entered a new stage."

China produced 25 million tons of beer last year, surpassing the United States for two consecutive years and becoming the world's largest beer producer. But the country's beer market remains fragmented, with a total of over 400 brewers, said Xiao.

CRB is a joint venture of the Hong Kong-listed China Resources Enterprises Ltd and the international brewing giant SABMiller. It has pursued an acquisition strategy since its establishment in 1994.

"I think CRB has adopted a good strategy in expanding its business in the fragmented beer market, as Chinese consumers are loyal to their local brands," said Qiao Baijun, an industry analyst from Galaxy Securities.

(China Daily March 10, 2004)